Market Vectors® Agribusiness ETF

For the week ending August 18, fertilizers continued to become less affordable. Fertilizer affordability can help indicate the demand for fertilizers.

Continued from Part 3 Source of funding As Mosaic Co. (MOS) postpones its potash expansion for one or two years, and fiscal year 2013’s working capital increase reverses (largely due to an inventory build-up), we could expect the company to generate a free cash flow after dividends amount of ~800 million per year over the […]

Natural gas prices are critical for nitrogen and ammonia-based phosphate fertilizer producers.

Mosaic (MOS) released its 2Q17 earnings on August 1, 2017, and reported EPS (earnings per share) of $0.28, which beat analysts’ estimate of $0.25.

Phosphate fertilizer prices are key to Mosaic’s (MOS) Phosphate segment’s sales, earnings, and stock price.

PotashCorp’s (POT) Potash segment sales grew by ~9% YoY to $1.2 billion in 3Q17. Strong shipment volumes and price growth drove this growth.

Ammonia is used to make phosphate fertilizers like DAP (diammonium phosphate) and MAP (monoammonium phosphate).

For the week ending October 28, the overall movement in urea prices was flat to positive. Granular urea prices rose 6.6% to $211 per metric ton in China.

Last week, potash prices continued to show weakness week-over-week. Prices were broadly flat to positive for the week ending April 21.

Of the 22 analysts surveyed, about 32% of them gave Mosaic (MOS) a “buy” rating. About 41% of analysts issued a “hold” rating, and only 27% issued a “sell” rating.

With CF Industries’ production capacity increasing, its cash flow per ton of product is also expected to increase.

As of December 30, 2016, Deere (DE) was trading at a one-year forward PE multiple of 22.6x compared to Caterpillar’s (CAT) of 30.6x.

The significance of potash price Wholesale potash price is one of two factors (the other being sales volume) that influence potash producers’ revenues. When prices rise, so does revenue, which will translate to higher profitability (margins), earnings, and share prices. However, when prices fall, they will have a negative impact on fundamentals and share prices. […]

If Monsanto and Bayer merge, they’ll become the largest global pesticide and seed company. Monsanto’s business is the best fit for Bayer’s Crop Science segment.

Overall, 4Q15 potash shipments declined 16% to 1,931 thousand tons, from 2,039 thousand tons in 4Q14. Most of the decline came from the international crop nutrient shipments.

After a year of declining sales and increasing costs, management seems much more optimistic regarding potash as well as Langbeinite.

Increased supply will drive exports to a record Given the increased supply, Chinese firms have been exporting some of their urea, a type of nitrogenous fertilizer. While exports have historically remained close to zero during the busy season, export activity was above 200,000 metric tonnes per month this year, which suggests domestic manufacturers are willing […]

During 1Q17, Agrium experienced a slight expansion in gross margins from 20% in 1Q16 to 21% in 1Q17.

Over the past 12 years, Scotts Miracle-Gro’s (SMG) gross margins have averaged ~35%. The company’s gross margins have been fairly stable in the past.

On November 3, 2016, Toro announced that it had entered into an agreement to acquire Regnerbau Calw, a privately held manufacturer of professional irrigation equipment.

In the last 12 months, PotashCorp (POT) has earned about 36% of its total sales from its Potash segment.

Agrium’s (AGU) earnings for 1Q17 are estimated to fall from $0.05 per share in 1Q16 to -$0.06 per share.

CF Industries’ (CF) earnings have been falling for the past five years, and it reported negative earnings in 4Q16.

Crop condition Crop condition is an indicator published every week by the United States Department of Agriculture (USDA) during the planting and harvest season. The indicator is useful in estimating the yield that farmers will be able to harvest this year. Solid percentages often point to strong crop production, which tends to alleviate pressure on […]

Uralkali’s latest move might be considered a punishment. But also note that outside forces can create a more competitive environment.

Last week, MAP (monoammonium phosphate) prices in Brazil continued their uptrend, while prices in NOLA (New Orleans) moved sideways.

As crops widely trade in the international market, they often converge with each other if transportation costs aren’t so high.

Unlike PotashCorp (POT), Mosaic (MOS), and CF Industries (CF), Agrium (AGU) has a large retail business, giving the company more stability in earnings.

CF Industries (CF) reported its quarterly earnings on August 2, 2017. Its EPS was $0.10, which was in line with analysts’ consensus estimate.

As of January 23, 2017, one of the six analysts covering Intrepid Potash has a “buy” recommendation for the company over the next 12 months.

Mosaic (MOS) earned about 34.0% of its revenue and 28.0% of its gross margin from its International Distribution segment in 4Q16.

With a gross deficit, Intrepid Potash reported an adjusted net loss per share of $0.23 in 2Q16, which would also make it the fifth consecutive quarter that the company has reported a net adjusted loss.

Ammonia is used to make phosphate fertilizers like DAP (diammonium phosphate) and MAP (monoammonium phosphate).

Generally, a capacity increase tends to lag demand growth, as producers like to see a stronger market before making significant investments.

In the week ending January 20, average MAP prices in Brazil rose 2.1% to $343 per metric ton from $336 per metric ton the previous week.

Monsanto (MON) is set to announce its 1Q18 earnings on January 4, 2018, with an EPS (earnings per share) of $0.42.

CF Industries reported second-quarter sales of $1.3 billion, which beat analysts’ estimate of $1.2 billion.

Average DAP prices in China were flat at 2,669 Chinese yuan per metric ton last week. DAP prices in Morocco remained unchanged at $340 per metric ton.

Over the years, Intrepid Potash (IPI) has shifted its business model to focus more on Trio.

In this article, we’ll compare the company’s potash cost of goods per ton to its average selling price per ton and those of other players in the market.

During the first nine months of 2015, Potash Corporation’s free cash flows declined to $913 million from $1,175 million in the corresponding period in 2014. This was primarily due to a decline in potash prices.

The average DAP price at US Gulf NOLA for the week ended March 25 rose to $340 per metric ton ($308 per short ton) compared to $302 per metric ton ($333 per short ton) the previous week.

Deere is the world’s largest manufacturer of tractors and harvesting combines. It’s slated to declare its 3Q16 earnings before markets open on August 19.

Last week, natural gas prices at Henry Hub fell by an average of 3.1% week-over-week to $3 per MMBtu from $3.2 MMBtu a week ago.

For the upcoming 3Q17, analysts’ consensus sales estimate for Monsanto (MON) is $4.17 billion, which will be a slight fall from $4.2 billion in 3Q16.

Wheat futures prices for December contracts on the Chicago Board of Trade dropped by 0.36% and closed at $4.82 per bushel on December 11, 2015.

CF Industries has resorted to leverage to fund its projects, which are expected to create more nitrogen capacity and, in turn, benefit shareholders.

In September, the global wheat inventory declined 1.5% to 249 million metric tons compared with 252 million metric tons in August 2016.

Wheat futures contracts for March delivery were trading above the crucial support level of 480 cents per bushel on January 12, 2016.

Unlike the nitrogen and phosphate fertilizer prices, potash fertilizer prices have remained relatively stable so far in 2017.

PotashCorp’s average potash selling price fell ~34.0% to $157 per ton in 4Q16, from $238 per ton in 4Q15. Potash prices in North America fell ~35.0%.

Inflation in South Africa has primarily been fueled by higher food and fuel costs over the years, reaching 5.8% in November 2014.

Like Monsanto (MON), FMC Corporation (FMC) is in the business of crop protection products. The majority of FMC’s sales come from its Agricultural Solutions segment.

Overall, the nitrogen prices have weakened in 3Q15, falling to $319 per metric ton from $356 per metric ton in 3Q14.

The Mosaic Company (MOS) mainly produces and sells phosphate and potash fertilizers. The company is one of the largest producers of phosphate….

Last week, potash prices in the Cornbelt region of the US moved sideways week-over-week to $230 per metric ton.

Given all that we’ve discussed so far in this series, let’s look at analyst ratings and price targets for CF Industries for the next 12 months.

CF Industries (CF) reports its sales in five segments: UAN (urea ammonium nitrate), Granular Urea, Ammonia, AN (ammonium nitrate), and Other Nitrogen Products.

Industry concentration Industry concentration is a factor that affects competition. When only a few firms occupy a large portion of the industry’s revenue, competition tends to be less, as companies try to live with each other to maintain profits. On the other hand, when there are a large number of firms vying for market share, […]

Potash fertilizers Most of the fertilizer companies we’ve discussed in this series sell all or some of the three NPK (nitrogen, phosphorous, and potassium) macronutrients. To learn more about these macronutrients’ key role in agriculture, read Agricultural Fertilizer Industry: Your Comprehensive Overview. In this part, we’ll look at what 2017 meant for potash producers. Price trends […]

Global demand for Bunge’s core agribusiness products like oilseeds and grains grew in 2015.

Fertilizer stocks have failed to impress investors in 2018. The VanEck Vectors Agribusiness ETF (MOO) has returned ~1.4% year-to-date.

CVR Partners (UAN) emerged as the top gainer among fertilizer stocks with a 6.7% rise last week to close at $3.18 per share.

Analysts’ ratings So far in this series, we’ve discussed analysts’ estimates for Agrium’s (AGU) 3Q16 sales, margins, and earnings per share. While you can gauge the outlook for the company using these estimates, it’s also helpful to look at analysts’ recommendations and price targets for Agrium over the next 12 months. Ratings and price targets Overall, […]

The merger between Monsanto (MON) and Bayer is worth $66 billion. It’s one of the largest deals in the agribusiness (MOO) industry.

Out of 16 analysts surveyed by Bloomberg, about 50% have “buy” ratings for CF Industries (CF). About 44% have “hold” recommendations, and one has a “sell” rating for the company.

Despite a sales decline and lower year-over-year price realization, Agrium’s (AGU) margins saw an improvement during 2Q17.

In 3Q16, Agrium’s Retail segment contributed 84% of total gross profit, with crop protection and crop nutrients making up the majority of segment sales.

It’s now time to look at what investors are paying for CF Industries prior to its 2Q17 earnings. Earlier, we learned that CF Industries is expected to report negative earnings per share in 2Q17.

In 4Q17, the overall nitrogen shipments of the five companies discussed below moved lower year-over-year.

Bunge’s (BG) Agribusiness segment processes oilseeds into vegetable oils.

On September 12, 2016, PotashCorp and Agrium announced their intention to combine in a merger of equals. But China and India have set conditions.

Bunge’s (BG) smallest operating segment is its Fertilizer segment, which has operations in Argentina.

The supply-demand imbalance will further push down potash prices in the coming years. It will hurt companies such as PotashCorp, Mosaic, Intrepid Potash (IPI), and Agrium (AGU).

So far this year, some major agribusiness stocks, particularly in the fertilizer sector, have performed poorly.

MAP (monoammonium phosphate) prices last week continued their ascent.

As of September 18, the consensus mean price target on CMP stood at $69.5 per share, which was about 1.6% lower than the closing price of $70 on the same day.

CF Industries (CF) is set to announce its 4Q16 earnings on February 15, 2017, with estimated earnings per share of -$0.05. In 4Q15, CF Industries reported EPS of $0.76.

Monsanto’s (MON) Soybean Seed and Traits segment is the second-largest subsegment under the Seeds and Genomics segment.

Scotts Miracle-Gro announced a 6% dividend increase to $0.53 per quarter from $0.5 per quarter. It has consistently raised its dividend in the past.

During 2Q17, CF Industries’ (CF) overall gross margins fell steeply year-over-year from 46.5% to 15.3%.

As of December 25, 2017, Monsanto stock was covered by 18 analysts according to Reuters. The current consensus rating on the stock stood at 2.56.

CF Industries (CF) closed at $27.3 per share on June 9, which was 13.4% lower than its levels at the beginning of this year.

The importance of capacity utilization Capacity utilization measures how much of an industry’s or company’s available production output is being used. It’s based on dividing actual output by potential output. Because an industry or firm will often try to match production to demand, a rising capacity utilization rate means faster growth in demand relative to […]

The Bayer-Monsanto (MON) deal is still under review for antitrust issues in the US due to concerns that the two companies combined could harm the competitive environment.

As of January 23, 2017, the consensus next 12-month price target for SMG is $97.30 per share. That day, the company closed 2.6% below that price target.

China is one of the largest fertilizer consumers in the world. Investors are concerned that retaliatory measures might hurt fertilizer companies.

In the week ending April 7, 2017, fertilizer affordability didn’t change. Notably, the Fertilizer Affordability Index remained flat at 0.60x week-over-week.

Fertilizer stocks plummeted on the heels of the announcement that Russia’s Uralkali was quitting the Belarusian Potash Company cartel. The market overreacted.

Last week, which ended September 7, the VanEck Vectors Agribusiness ETF (MOO) fell 1.8%, while the S&P 500 Index fell 1%.

China is the largest consumer of nitrogen fertilizers, but it produces most of it within its borders. Urea is Chinese farmers’ top choice.

According to Israel Chemicals’ June 2017 6-K filings, India imported 3.8 million tons of potash in 2017, while China imported 6.8 million tons of potash.

Natural gas and nitrogenous fertilizers Natural gas is a major raw material input in the production of nitrogenous fertilizers, such as urea and ammonia, ranging from 40% to 70% of cost of goods sold. A higher natural gas price increases the cost of goods sold and compresses margins. This in turn lowers earnings and free […]

Out of the 14 Wall Street analysts covering Israel Chemicals (ICL), only one has a “buy” recommendation on the company, 12 have a “hold” recommendation, and only one analyst has a “sell” recommendation.

Mosaic (MOS) continued to enjoy higher margins at 7%—compared to Agrium’s (AGU) margins at 5%. Mosaic’s margins were flat year-over-year.

About 56% of Wall Street analysts still have “buy” recommendations for CF Industries.

In the week ending March 31, 2017, the Fertilizer Affordability Index fell slightly to 0.60x from 0.62x the previous week.

Companies forfeit the opportunity to benefit from lower natural gas prices when they hedge. But hedging activity protects companies’ earnings when natural gas prices rise.

Following Mosaic’s 2Q16 earnings release, Wall Street analysts revised their next-12-month price target down to $25.48 from $25.64.

CF Industries (CF) reported its 1Q17 earnings on May 3 after the market closed. The company posted adjusted EPS (earnings per share) of $0.05, which missed analysts’ revised estimate.